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Insurers Likely Won't Face Downgrades After Sandy, Says Moody

Most property-casualty insurers appear able to absorb losses from Hurricane Sandy without taking credit downgrades or major hits to their capital base, analysts from Moody's Investors Service Inc. said in a presentation Friday.

Current estimates of industrywide losses have topped out at $20 billion, an amount that will "negatively impact fourth-quarter earnings" but not "jeopardize insurance company capital," said Paul Bauer, a senior credit officer at Moody's.

Still, the credit-rating company said it was more likely that industry claims costs would come in above the range of projected losses than below it.

More firms could face a threat of a downgrade if industrywide losses began to approach $50 billion, an amount that represents roughly 10% of the U.S. property-casualty industry's surplus, said Bruce Ballentine, another senior credit analyst at the firm. Losses from Hurricane Katrina, the most expensive natural disaster in U.S. history, were about $40 billion.

Mr. Bauer said "most major insurers will be able to absorb the losses" without damaging capital strength because they were taking the hit from Sandy "from a position of relative capital strength" after a year characterized by strong earnings and--until now--very few major disasters.

Most insurers, however, won't begin to have an accurate measure of their potential costs until the middle of next week. Mr. Bauer predicted commercial insurers could face "meaningful losses," but that the reinsurers that sell backup protection would pay a "relatively modest" proportion of the claims.